SIP or Systematic Investment Plans is one of the most preferred investments options in the present scenario as it involves periodic investment and thus less cost is incurred at one time. It is also an investment with best returns as it is a Mutual Fund type investment. But before investing in SIP there are few things that you must necessarily know.
SIP Helps In Making A Disciplined Investment
SIP is an investment plan that helps in instilling discipline in an investor. An investor makes the investment from the basic salary enabling regular savings and a periodic investment. SIP can be of many types like equity funds, balanced funds or debt funds. Thus it helps is proper asset allocation periodically ensuring returns as well as savings. The longer an investor invests in SIP, the better is the return as it is a compounded amount.
The Returns Varies As The Market is Volatile
You have to make periodic investment once you have started a Systematic Investment Plan. Now, from time to time the market rate varies. This means that the cumulative return varies according to the market rate. Also, for different types of SIP like equity, debt, etc the return rates are different.
Management of Funds Invested In SIP
Since SIP is a well-disciplined type of investment, management of funds is often taken lightly. But regular reviewing of your investment and market policy is required for successfully ensuring good returns. In case if an anomaly arises in case the investment tenure, it is a flexible type of investment. Thus the investor must immediately change the type of investment and the periodic amount invested.
Claim Your Returns Before Your Aimed Tenure
Systematic Investment Plan is a type of investment which falls under the category of mutual funds. Thus after making regular investments for a little more than half the tenure you are actually aiming at, review the market scenario. If the market rates are good, claim your returns immediately. Similarly, if there is a fall in market rates keep regular checks and withdraw the returns as soon as the rate rises. In any case, it is better to aim at claiming your funds before the tenure that you have in mind as the market is volatile.
Keep Continuously Investing in SIP for a Longer Duration
You may have invested in SIP for a short tenure and noticed that the market rates are suddenly very high. Do not withdraw your return immediately. The market is highly unpredictable and the rates keep rising at times. Thus the market will again correct itself in future. Stopping your investment will be limiting your funds. Instead, go for a longer duration which will ensure the given two things:
- Irrespective of market rates, Systematic Investment Plan generates a profit over a longer tenure.
- The market rates when higher after a longer tenure will give better returns.